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Feldstein: We’re Not in a Recession

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    Former White House Economic Advisor Martin Feldstein on the state of the economy.

  • Duration 6:34
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An economy which is expanding.

We see employment which is what -- the key indicators of recession still growing.

So we expect the economy to continue to grow that's our best forecasts as of now so we -- not expecting a recession.

Fed Chairman Ben Bernanke today as suggesting that we are not now in a recession nor are we likely to be dragged into one but others disagree economist David -- -- for example wrote this weekend.

In the Wall Street Journal with signs do point to recession and -- -- Of the husband funds saying that it is his conviction quote that the US economy has already.

Entered into a recession so.

-- Marty Phelps I think professor Martin Feldstein is the former chair of the White House economic advisors and currently an economics professor at Harvard University.

And he is advising the Romney campaign professor good to see a -- -- -- No we're -- in recession.

We are not doing well the economy is doing very badly.

When I was in Europe last week and said that to some of my European friends who -- By comparison -- conditions in Europe you guys are okay but look at this one point 3% and we keep going down I mean it was.

It was in 2009.

It was higher than it was in.

2010.

And it is now I -- just we're going in the wrong direction first quarter of the year was 2% it dropped to 13.

Last time ours on this program I said we'd be lucky.

Very lucky to get to 2% this year we're not gonna get to 2% so Marty Feldstein says -- is no way we're gonna get to -- grolier gonna have very slow growth.

We have terrible unemployment the eight point 1% unemployment rate if the labor force participation rate hadn't -- That is of people just hadn't pull themselves out of -- job market be back where we were a year ago at nine point one why is the economy doing so yeah.

Well there are a lot of reasons but I think the cloud of tax increases that hangs over the -- loses.

Is stopping them from doing investing.

I think in the housing area although we're seeing some pick up and house prices.

People are having a hard time getting mortgages.

Interest rates is certainly very low that's why what the Fed is up to was doing no no real good.

-- those interest rates.

May attract people to want to borrow but that they don't have very good -- stores they're not getting access to funds.

Okay what we we chart the market very closely here on after the bell we went back to -- in the months.

That the recession start December 2007 we found out something very interest it.

-- the S&P and the Dow Jones Industrial Average were almost precisely at the same number.

As it is now and I know you said that we're not in a recession but it's kind of kind of spooky is -- not that that we saw the same numbers as they were going into recession as we were going to recession back then of course seem in real terms adjusting for the price level.

That is -- means lower today than it was then.

What can we do.

To get out of the slump that we're in now I -- Romney has been criticized you work with a Romney.

Group of economists has as not having enough specific plans to deal with the economy is that a fair charge and if not what is he suggesting we do.

I think what he is suggesting.

In the form of tax cuts corporate tax changes.

I think those are things that will have me could have a powerful positive effect on the economy but they have not connected.

So to a lot of voters it looks like tax cuts are a way of increasing the after tax income of middle and high income individuals but what's it gonna do about job -- I don't want to do about jobs.

But I think -- Romney campaign has not delivered that.

That message.

While you're part of the Romney campaign so you -- not part of the message delivers have you when you suggest that you guys are not pushing this hard enough in the right way saying that you were for lowering tax rates 20% across the board.

And you have to deliver that message harder what do they say.

Well I shouldn't talk about my conversations from people in the campaign but I think it's generally last -- -- -- But I think it really is important.

For them to in these last weeks to get across the notion.

That reducing tax rates improving corporate tax.

Competitiveness.

That those are things that can help the economy.

And I don't see any thing that in the Obama campaign.

That will help the economy.

Well he's got a debate they have a debate coming up on Wednesday do you think that should be how he begins his debate by focusing on his tax plan.

Well.

Why is there are political people -- We'll have to make that call but I think it would certainly be an opportunity.

To explain to the public.

That cutting taxes is a way.

Encouraging people.

To invest.

To expand to hire.

And that's really what the economy needs finally to Federal Reserve board you have been critical of the Federal Reserve board and its actions.

Some people say and Ben Bernanke says while there's no inflation there's no not necessarily an economic cost.

To doing all of the the bond buying they've been doing the money -- that they've been doing is there are cautioned -- so what is.

I think there's a longer term risk I think right now it's doing very little good.

I think lowering interest rates at a time when mortgage rates are at rock bottom when corporations are awash in funds doesn't do any good.

I think the problem is going to be that a few years from now -- the economy starts to pick up.

They will have -- something like four trillion dollars to the liquidity of commercial banks and it's going to be hard except by raising interest rates very substantially.

To stop that from becoming inflation -- gonna do this quick but is Ben Bernanke in in pushing the QE3 is he.

Is he enabling irresponsible politicians to borrow money they don't have.

It certainly is keeping interest rates on US treasuries very low.

And that is allowing them to avoid the markets' signal.

That there are spending money they don't -- professor Martin Feldstein from Harvard good to -- professor thank you very much for being here.

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